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Energy Diversity Strengthens the United States. How Should We Pay for It?

The Federal Energy Regulatory Commission, the body that sets the rules for the competitive energy markets around the country, will soon take up a proposal from the Department of Energy (DOE) to adjust the pricing system, to ensure the survival of electricity generators that keep at least 90 days of fuel on hand. The department believes the current trend of unusually low power prices is pushing more of these plants, including nuclear reactors, into early retirement, and threatening the power grid’s resiliency and reliability.

At the heart of the DOE’s proposal is the idea that everybody values resilience, but at the moment, nobody pays for it. In the electricity markets today, consumers pay for energy, and they pay for capacity – that is, the ability to make energy when needed. They pay for other services on the grid, like voltage control, that keep the electrons flowing smoothly. But there isn’t a mechanism to pay for resiliency, which the federal government defines as “the ability to withstand and rapidly recover from all hazards.”

Caitlin Durkovich, director at Toffler Associates, on why nuclear is important for energy diversity.

A number of parties submitted comments on the DOE’s proposed changes, and I was one of them. For almost five years, I had the privilege of serving as the Assistant Secretary of Homeland Security for Infrastructure Protection. In that role, I was also Chair of the Nuclear Government Coordinating Council and the Co-Chair of the Energy Sector Government Coordinating Council.

In my view, the DOE’s proposed rule is a bold extension of “ongoing government efforts towards securing our critical infrastructure and maintaining resilience of the electric grid.”

Nuclear plants stop to re-fuel once every 18 to 24 months, making them uniquely resistant to disruptions in fuel supply and price fluctuations.

“Changes in fuel supply are an identified risk to the electric subsector while volatile oil and gas prices and demands is a risk inherent to the oil and natural gas sector,’’ I told the Commission. “If the natural gas pipeline system was threatened or disrupted by any sort of national security event, the nation would turn to power sources that were not dependent on the gas delivery system—in this case nuclear, renewables, and coal.”

Recent market trends threaten the economics of nuclear plants and could reduce the diversity of supply. As I wrote, “Redundancy and diversity are fundamental principles of continuity planning, both at the enterprise and the sector level … Diversity in the energy markets is even more critical in the context of increasing geopolitical tensions and a dynamic dangerous threat environment.”

As we consider the method we use to price electricity, we should think about the broader benefits, and the strength that nuclear electricity adds to our system in the longer run.

The above is a guest post by Caitlin Durkovich, director at Toffler Associates. For almost five years, she served as the Assistant Secretary of Homeland Security for Infrastructure Protection. In that role, she also was Chair of the Nuclear Government Coordinating Council and the Co-Chair of the Energy Sector Government Coordinating Council.

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